Friday, June 29, 2007

A Mouse Dies, A Nation Cries

May Personal Income And Outlays

Real disposable personal income in chained 2000 dollars slipped 0.1 percent in April, after falling 0.6 percent in May. (See table 5). But the big drop off in April is the removal of the first quarter adjustment for special income, which is not carried forward to the second quarter, and last year second quarter real personal income was down too. The point I'm making is that this is not a sudden change.

Real personal consumption expenditures (PCE) in chained 2000 dollars rose 0.1 percent in May, after rising 0.2 percent in April. In March and May, real personal consumption expenditures for services fell. I don't see the strength in services that everyone thinks is there. (See table 7).

Needless to say, the savings rate is still negative.

Table 9 shows price indexes for PCE and percent change from the prior period compared to 2000. These are changes month to month, rather than annualized month to month changes. Durable goods have been falling or flat since October 06, so over the course of the period the durable index has fallen from 88.677 to 87.558. The price indexes for non-durables (which include food and gas) started increasing again in December. These are the month to month changes in the non-durables price index for the first five months of the year:

.2 > .4 > 1.1 > .7 > 1.3

The three month increase is 3.1%, which would equate to an annualized inflation rate of over 12% for nondurables, ie, food and gas if it continued. The economy cannot sustain this for very long, and it is a brutal experience for retirees on moderate fixed incomes and huge swathes of the wage-earning population. It's made worse by the fact that it is following on a period of relatively high inflation. In this environment, profits for companies selling to consumers are under severe pressure.

The reason durable price indexes are falling is because people don't have the money to buy durables, so prices are dropping to maintain sales. So the net effect for someone who has good income and can buy durables is relatively benign - such consumers are getting a compensating effect. For the lower income person, there is no offsetting effect and CPI is doubled, tripled or quadrupled. Crovelli's 20% estimation is about right. Prices for some nondurables have dropped, but if you are trying to save money or are in the bottom 30% of the income ranges, that's about what you see.

Now, if you consider the impact of high inflation on households that are overextended on debt and going retrograde on their homes, you'll get a picture of the consumer lending environment. Not good!!!

Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans....``You'll see massive losses from banks, insurance companies and pension managers,'' said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody's and Fitch understate the risks of subprime mortgage bonds. ``The longer they wait, the worse it's going to be.''...Executives at New York-based S&P, Moody's and Fitch say they are waiting until foreclosure sales show that the collateral backing the bonds has declined enough to create losses before lowering ratings on some of the $6.65 trillion in outstanding mortgage-backed debt.

If a reader still considers me a nattering nabob of negativity on the credit issue, I strongly recommend that you read the article all the way through. The ratings firms really are waiting too long, pretending that prices on sales are going to improve. They aren't, and you can calculate expected losses at least on the 90 day plus delinquencies. This is one reason why REO sales are not particularly well-priced right now. As soon as prices are knocked down enough to move the stuff, whoever is selling recognizes not just the loss on that home but also impairs the value of holdings.

Thursday, June 28, 2007

Immigration Bill: H2C Indentured Servants

This is the indentured servant provision of the immigration bill, aka the H2C visas in Section 218 of Senate bill 1348. It's noxious. It provides that corporations can bring in just about anyone they want. The person brought in can bring spouse and/or children. The initial authorization runs for 3 years, and then can be renewed once. Then the Secretary can reauthorize for another term without the alien having to leave the country. Corporations already recruit illegal immigrants overseas; with this bill, they can no longer get fined for it.

If the person brought in is unemployed for 60 days, the person gets chucked out. Put yourself in the position of one of these people. You will be working for extremely low wages all during the time you are in the country. You can never become naturalized, or a resident. You can't strike. You are employed essentially at will, and you depend upon the company to get you reauthorized. If you have a child born here, that child is a citizen, so you'll stay and work so that child can get educated and have a better life. If you agitate about working conditions, or unionize, guess what? You'll be on the boat back before you know it. True, you can apply at another company and work for that company, but the market is not exactly going to be competitive, is it? The market for labor will always be restricted to whatever an alien is willing to accept to have a child born in this country.

All the provisions at the end that talk about the "prevailing wage" mean absolutely nothing, because the provisions of this bill can and will be used to drive down prevailing wages. The protections for US workers mean absolutely nothing, because there are a million ways to bypass them, and no provision set up to enforce them, and no funds provided. Also, all the Department of Labor has to do is determine that there is a shortage of workers, and those protections get thrown out. There will be amazing shortages of workers very shortly.

If you are in union currently, just imagine what will happen if you ever strike again. Instant scab-o-rama, baby. These workers can be engineers, doctors, nurses, scientists, or those oh-so-loveable maids and nannies that make the lives of elitist yuppies so liveable - and best of all, they can't talk back!!

Try to find this information in a regular newspaper. Let me know if you succeed. The immigration bill should have been called the "attack on American workers and current immigrants bill of 2007". Short title: U R SCREWED, SUCKAH. Don't stop contacting Congress. Let them know that a political tarring and feathering will be forthcoming if they support this bill, or anything like it. As the Chief commented, anyone at least half humane and sane could do better than this.

SEC. 218A. ADMISSION OF H-2C NONIMMIGRANTS.

`(a) Authorization- The Secretary of State may grant a temporary visa to an H-2C nonimmigrant who demonstrates an intent to perform labor or services in the United States (other than the labor or services described in clause (i)(b) or (ii)(a) of section 101(a)(15)(H) or subparagraph (L), (O), (P), or (R)) of section 101(a)(15).

`(b) Requirements for Admission- An alien shall be eligible for H-2C nonimmigrant status if the alien meets the following requirements:

`(1) ELIGIBILITY TO WORK- The alien shall establish that the alien is capable of performing the labor or services required for an occupation under section 101(a)(15)(H)(ii)(c).

`(2) EVIDENCE OF EMPLOYMENT- The alien shall establish that the alien has received a job offer from an employer who has complied with the requirements of 218B.

`(3) FEE- The alien shall pay a $500 visa issuance fee in addition to the cost of processing and adjudicating such application. Nothing in this paragraph shall be construed to affect consular procedures for charging reciprocal fees.

`(4) MEDICAL EXAMINATION- The alien shall undergo a medical examination (including a determination of immunization status), at the alien's expense, that conforms to generally accepted standards of medical practice.

`(5) APPLICATION CONTENT AND WAIVER-

`(A) APPLICATION FORM- The alien shall submit to the Secretary a completed application, on a form designed by the Secretary of Homeland Security, including proof of evidence of the requirements under paragraphs (1) and (2).

`(B) CONTENT- In addition to any other information that the Secretary requires to determine an alien's eligibility for H-2C nonimmigrant status, the Secretary shall require an alien to provide information concerning the alien's--

`(i) physical and mental health;

`(ii) criminal history and gang membership;

`(iii) immigration history; and

`(iv) involvement with groups or individuals that have engaged in terrorism, genocide, persecution, or who seek the overthrow of the United States Government.

`(C) KNOWLEDGE- The alien shall include with the application submitted under this paragraph a signed certification in which the alien certifies that--

`(i) the alien has read and understands all of the questions and statements on the application form;

`(ii) the alien certifies under penalty of perjury under the laws of the United States that the application, and any evidence submitted with it, are all true and correct; and

`(iii) the applicant authorizes the release of any information contained in the application and any attached evidence for law enforcement purposes.

`(c) Grounds of Inadmissibility-

`(1) IN GENERAL- In determining an alien's admissibility as an H-2C nonimmigrant--

`(A) paragraphs (5), (6)(A), (7), (9)(B), and (9)(C) of section 212(a) may be waived for conduct that occurred before the effective date of the Comprehensive Immigration Reform Act of 2007;

`(B) the Secretary of Homeland Security may not waive the application of--

`(ii) section 212(a)(3) (relating to security and related grounds); or

`(iii) subparagraph (A), (C) or (D) of section 212(a)(10) (relating to polygamists and child abductors); and

`(C) for conduct that occurred before the date of the enactment of the Comprehensive Immigration Reform Act of 2007, the Secretary of Homeland Security may waive the application of any provision of section 212(a) not listed in subparagraph (B) on behalf of an individual alien--

`(i) for humanitarian purposes;

`(ii) to ensure family unity; or

`(iii) if such a waiver is otherwise in the public interest.

`(2) RENEWAL OF AUTHORIZED ADMISSION AND SUBSEQUENT ADMISSIONS- An alien seeking renewal of authorized admission or subsequent admission as an H-2C nonimmigrant shall establish that the alien is not inadmissible under section 212(a).

`(d) Background Checks- The Secretary of Homeland Security shall not admit, and the Secretary of State shall not issue a visa to, an alien seeking H-2C nonimmigrant status unless all appropriate background checks have been completed.

`(1) AUTHORIZED PERIOD AND RENEWAL- The initial period of authorized admission as an H-2C nonimmigrant shall be 3 years, and the alien may seek 1 extension for an additional 3-year period.

`(2) INTERNATIONAL COMMUTERS- An alien who resides outside the United States and commutes into the United States to work as an H-2C nonimmigrant, is not subject to the time limitations under paragraph (1).

`(3) LOSS OF EMPLOYMENT-

`(A) IN GENERAL-

`(i) PERIOD OF UNEMPLOYMENT- Subject to clause (ii) and subsection (c), the period of authorized admission of an H-2C nonimmigrant shall terminate if the alien is unemployed for 60 or more consecutive days.

`(ii) EXCEPTION- The period of authorized admission of an H-2C nonimmigrant shall not terminate if the alien is unemployed for 60 or more consecutive days if such unemployment is caused by--

`(I) a period of physical or mental disability of the alien or the spouse, son, daughter, or parent (as defined in section 101 of the Family and Medical Leave Act of 1993 (29 U.S.C. 2611)) of the alien;

`(II) a period of vacation, medical leave, maternity leave, or similar leave from employment authorized by employer policy, State law, or Federal law; or

`(III) any other period of temporary unemployment caused by circumstances beyond the control of the alien.

`(B) RETURN TO FOREIGN RESIDENCE- Any alien whose period of authorized admission terminates under subparagraph (A) shall be required to leave the United States.

`(C) PERIOD OF VISA VALIDITY- Any alien, whose period of authorized admission terminates under subparagraph (A), who leaves the United States under subparagraph (B), may reenter the United States as an H-2C nonimmigrant to work for an employer, if the alien has complied with the requirements of subsection (b). The Secretary may, in the Secretary's sole and unreviewable discretion, reauthorize such alien for admission as an H-2C nonimmigrant without requiring the alien's departure from the United States.

`(4) VISITS OUTSIDE UNITED STATES-

`(A) IN GENERAL- Under regulations established by the Secretary of Homeland Security, an H-2C nonimmigrant--

`(i) may travel outside of the United States; and

`(ii) may be readmitted without having to obtain a new visa if the period of authorized admission has not expired.

`(B) EFFECT ON PERIOD OF AUTHORIZED ADMISSION- Time spent outside the United States under subparagraph (A) shall not extend the period of authorized admission in the United States.

`(5) BARS TO EXTENSION OR ADMISSION- An alien may not be granted H-2C nonimmigrant status, or an extension of such status, if--

`(A) the alien has violated any material term or condition of such status granted previously, including failure to comply with the change of address reporting requirements under section 265;

`(B) the alien is inadmissible as a nonimmigrant; or

`(C) the granting of such status or extension of such status would allow the alien to exceed 6 years as an H-2C nonimmigrant, unless the alien has resided and been physically present outside the United States for at least 1 year after the expiration of such H-2C nonimmigrant status.

`(1) shall be machine-readable, tamper-resistant, and allow for biometric authentication;

`(2) shall be designed in consultation with the Forensic Document Laboratory of the Bureau of Immigration and Customs Enforcement;

`(3) shall, during the alien's authorized period of admission under subsection (f), serve as a valid entry document for the purpose of applying for admission to the United States--

`(A) instead of a passport and visa if the alien--

`(i) is a national of a foreign territory contiguous to the United States; and

`(ii) is applying for admission at a land border port of entry; and

`(B) in conjunction with a valid passport, if the alien is applying for admission at an air or sea port of entry;

`(4) may be accepted during the period of its validity by an employer as evidence of employment authorization and identity under section 274A(b)(1)(B); and

`(5) shall be issued to the H-2C nonimmigrant by the Secretary of Homeland Security promptly after the final adjudication of such alien's application for H-2C nonimmigrant status.

`(h) Penalty for Failure To Depart- If an H-2C nonimmigrant fails to depart the United States before the date which is 10 days after the date that the alien's authorized period of admission as an H-2C nonimmigrant terminates, the H-2C nonimmigrant may not apply for or receive any immigration relief or benefit under this Act or any other law, except for relief under sections 208 and 241(b)(3) and relief under the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, for an alien who indicates either an intention to apply for asylum under section 208 or a fear of persecution or torture.

`(i) Penalty for Illegal Entry or Overstay- Any alien who enters, attempts to enter, or crosses the border after the date of the enactment of this section, and is physically present in the United States after such date in violation of this Act or of any other Federal law, may not receive, for a period of 10 years--

`(j) Portability- A nonimmigrant alien described in this section, who was previously issued a visa or otherwise provided H-2C nonimmigrant status, may accept a new offer of employment with a subsequent employer, if--

`(1) the employer complies with section 218B; and

`(2) the alien, after lawful admission to the United States, did not work without authorization.

`(k) Change of Address- An H-2C nonimmigrant shall comply with the change of address reporting requirements under section 265 through either electronic or paper notification.

`(l) Collection of Fees- All fees collected under this section shall be deposited in the Treasury in accordance with section 286(c).

`(m) Issuance of H-4 Nonimmigrant Visas for Spouse and Children-

`(1) IN GENERAL- The alien spouse and children of an H-2C nonimmigrant (referred to in this section as `dependent aliens') who are accompanying or following to join the H-2C nonimmigrant may be issued nonimmigrant visas under section 101(a)(15)(H)(iv).

`(2) REQUIREMENTS FOR ADMISSION- A dependent alien is eligible for nonimmigrant status under 101(a)(15)(H)(iv) if the dependent alien meets the following requirements:

`(A) ELIGIBILITY- The dependent alien is admissible as a nonimmigrant and does not fall within a class of aliens ineligible for H-4A nonimmigrant status listed under subsection (c).

`(B) MEDICAL EXAMINATION- Before a nonimmigrant visa is issued to a dependent alien under this subsection, the dependent alien shall submit to a medical examination (including a determination of immunization status) at the alien's expense, that conforms to generally accepted standards of medical practice.

`(C) BACKGROUND CHECKS- Before a nonimmigrant visa is issued to a dependent alien under this section, the consular officer shall conduct such background checks as the Secretary of State, in consultation with the Secretary of Homeland Security, considers appropriate.

`(n) Definitions- In this section and sections 218B, 218C, and 218D:

`(1) AGGRIEVED PERSON- term `aggrieved person' means a person adversely affected by an alleged violation of this section, including--

`(A) a worker whose job, wages, or working conditions are adversely affected by the violation; and

`(B) a representative for workers whose jobs, wages, or working conditions are adversely affected by the violation who brings a complaint on behalf of such worker.

`(2) AREA OF EMPLOYMENT- The terms `area of employment' and `area of intended employment' mean the area within normal commuting distance of the worksite or physical location at which the work of the temporary worker is or will be performed. If such worksite or location is within a Metropolitan Statistical Area, any place within such area is deemed to be within the area of employment.

`(3) ELIGIBLE INDIVIDUAL- The term `eligible individual' means, with respect to employment, an individual who is not an unauthorized alien (as defined in section 274A) with respect to that employment.

`(4) EMPLOY; EMPLOYEE; EMPLOYER- The terms `employ', `employee', and `employer' have the meanings given such terms in section 3 of the Fair Labor Standards Act of 1938 (29 U.S.C. 203).

`(5) FOREIGN LABOR CONTRACTOR- The term `foreign labor contractor' means any person who for any compensation or other valuable consideration paid or promised to be paid, performs any foreign labor contracting activity.

`(6) FOREIGN LABOR CONTRACTING ACTIVITY- The term `foreign labor contracting activity' means recruiting, soliciting, hiring, employing, or furnishing, an individual who resides outside of the United States for employment in the United States as a nonimmigrant alien described in section 101(a)(15)(H)(ii)(c).

`(7) H-2C NONIMMIGRANT- The term `H-2C nonimmigrant' means a nonimmigrant described in section 101(a)(15)(H)(ii)(c).

`(8) SEPARATION FROM EMPLOYMENT- The term `separation from employment' means the worker's loss of employment, other than through a discharge for inadequate performance, violation of workplace rules, cause, voluntary departure, voluntary retirement, or the expiration of a grant or contract. The term does not include any situation in which the worker is offered, as an alternative to such loss of employment, a similar employment opportunity with the same employer at equivalent or higher compensation and benefits than the position from which the employee was discharged, regardless of whether the employee accepts the offer. Nothing in this paragraph shall limit an employee's rights under a collective bargaining agreement or other employment contract.

`(9) UNITED STATES WORKER- The term `United States worker' means an employee who is--

`(A) a citizen or national of the United States; or

`(B) an alien who is--

`(i) lawfully admitted for permanent residence;

`(ii) admitted as a refugee under section 207;

`(iii) granted asylum under section 208; or

`(iv) otherwise authorized, under this Act or by the Secretary of Homeland Security, to be employed in the United States.'.

(2) CLERICAL AMENDMENT- The table of contents for the Immigration and Nationality Act (8 U.S.C. 1101 et seq.) is amended by inserting after the item relating to section 218 the following:

`Sec. 218A. Admission of temporary H-2C workers.'.

SEC. 404. EMPLOYER OBLIGATIONS.

(a) In General- Title II (8 U.S.C. 1201 et seq.) is amended by inserting after section 218A, as added by section 403, the following:

`SEC. 218B. EMPLOYER OBLIGATIONS.

`(a) General Requirements- Each employer who employs an H-2C nonimmigrant shall--

`(1) file a petition in accordance with subsection (b); and

`(2) pay the appropriate fee, as determined by the Secretary of Labor.

`(b) Required Procedure- Except where the Secretary of Labor has determined that there is a shortage of United States workers in the occupation and area of intended employment to which the H-2C nonimmigrant is sought--

`(1) EFFORTS TO RECRUIT UNITED STATES WORKERS- During the period beginning not later than 90 days prior to the date on which a petition is filed under subsection (a)(1), and ending on the date that is 14 days prior to the date on which the petition is filed, the employer involved shall take the following steps to recruit United States workers for the position for which the H-2C nonimmigrant is sought under the petition:

`(A) Submit a copy of the job opportunity, including a description of the wages and other terms and conditions of employment and the minimum education, training, experience and other requirements of the job, to the State Employment Service Agency that serves the area of employment in the State in which the employer is located.

`(B) Authorize the State Employment Service Agency to post the job opportunity on the Internet through the website for America's Job Bank, with local job banks, and with unemployment agencies and other labor referral and recruitment sources pertinent to the job involved.

`(C) Authorize the State Employment Service Agency to notify labor organizations in the State in which the job is located, and if applicable, the office of the local union which represents the employees in the same or substantially equivalent job classification of the job opportunity.

`(D) Post the availability of the job opportunity for which the employer is seeking a worker in conspicuous locations at the place of employment for all employees to see.

`(2) EFFORTS TO EMPLOY UNITED STATES WORKERS- An employer that seeks to employ an H-2C nonimmigrant shall--

`(A) first offer the job to any eligible United States worker who applies, is qualified for the job and is available at the time of need, notwithstanding any other valid employment criteria.

`(c) Petition- A petition to hire an H-2C nonimmigrant under this section shall include an attestation by the employer of the following:

`(1) PROTECTION OF UNITED STATES WORKERS- The employment of an H-2C nonimmigrant--

`(A) will not adversely affect the wages and working conditions of workers in the United States similarly employed; and

`(B) did not and will not cause the separation from employment of a United States worker employed by the employer within the 180-day period beginning 90 days before the date on which the petition is filed.

`(2) WAGES-

`(A) IN GENERAL- The H-2C nonimmigrant will be paid not less than the greater of--

`(i) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question; or

`(ii) the prevailing wage level for the occupational classification in the area of employment, taking into account experience and skill levels of employees.

`(B) CALCULATION- The wage levels under subparagraph (A) shall be calculated based on the best information available at the time of the filing of the application.

`(C) PREVAILING WAGE LEVEL- For purposes of subparagraph (A)(ii), the prevailing wage level shall be determined in accordance as follows:

`(i) If the job opportunity is covered by a collective bargaining agreement between a union and the employer, the prevailing wage shall be the wage rate set forth in the collective bargaining agreement.

`(ii) If the job opportunity is not covered by such an agreement and it is in an occupation that is covered by a wage determination under a provision of subchapter IV of chapter 31 of title 40, United States Code, or the Service Contract Act of 1965 (41 U.S.C.

The Wizard Of OZ Goes To Wall Street

The only reason that bond issues are failing, and IPOs are being withdrawn or cut back, and LBOs seem to be flagging, and GA might not be getting its Kia plant built any time soon is that the astrologers have determined that the stars are not favorable. It has nothing to do with any sort of widespread credit quality problem.

Just remember that. This is all very scientific and certain and the astrologers have never been wrong yet.

Roughly 200 individual property owners are finding themselves in the first step of a foreclosure because of a legal tussle between well-known Palmetto builder deMorgan Communities and the company that did roads, utilities, sewers and drainage for the development.”

“Real estate attorneys said that the neighborhood’s troubles could be a taste of what is to come as contractors in the state’s limping real estate market use every remedy available to them under Florida law to get developers to pay.”...“But some Oak View residents have simply declined to get excited. Ray Bartro, a retired Marine who lives in Carpenteras, does not foresee any legal action affecting his ownership. ‘What are they going to do, tear up my home and cart it away? I don’t think so. I have an Uzi.’

Finally, Sanity

Previously, the church had approved resolutions calling for the tearing down of walls constructed by Israel to protect itself from terrorist attacks coming from the Palestinian Authority territories and for divestment from the Jewish state...."The resolution refers to the recent Palestinian on Palestinian violence in the Gaza Strip and points out that this occurred in spite of Israel's disengagement in 2005," adds Dexter Van Zile, UCC layman and Fair Witness Executive Committee member.

The resolution, which was sent to the denomination's executive council for implementation, acknowledges the UCC "may have overlooked many aspects" of the relationship between Israel and its Arab neighbors. According to Van Zile, "This is an admission that previous UCC resolutions were probably one-sided and unfair when it came to Israel. It directs the UCC to 'establish a Task Force to engage in on going and balanced study,' and assist our church in acquiring a 'deeper understanding of the situation.'"

About time. The divestment movement (and all the political cover that these churches gave some rather nasty people) did real harm. Maybe at the next synod they'll be able to bring themselves to admit that there is no "probably" about the unbalance.

Wednesday, June 27, 2007

Crovelli On Inflation

More than half of my income, (i.e., around five hours of labor), that Friday was required to purchase only four ounces of tobacco, 144 ounces of cheap beer, six gallons of petrol, and less than two pounds of low-quality, greasy food. I felt very much like young Tom in Steinbeck’s The Grapes of Wrath, who finds himself in the hopeless position of working all day at a backbreaking job only to find that his meager wages will scarcely purchase enough food and gasoline to allow him to get to work the following day.

Last summer these same quantities of tobacco, cheap ale, gasoline, and low quality, greasy food cost me approximately 20% less than they do today.

It's going to get worse rather than better. Read it to the end where he's cuddling his gold and his rifle; there is a new trend in political science coming. Washington has been so out of touch with ground-level economic realities for so long that the fury is past all their understanding. Trent Lott and Feinstein can blather on all they want about talk radio, but what drives talk radio is the experience of the people. The answer cannot be to flood the market with additional cheap labor in the form of essentially unrestricted immigration that really pays no income taxes (most of them list a high number of dependents).

I have never seen the government so willfully not just misrepresent the people, but do precisely opposite what the people want. Hillary talks about a vast, Right-Wing conspiracy, but I feel that the American public is the victim of some sort of political-class conspiracy. It's surreal.

It is indeed. Imagine being an older person largely dependent upon social security for retirement or any fixed pension, and facing these food prices. Just imagine it. Artificially keeping the CPI low fools no one who is paying these prices. It may allow Wall Street and DC to sustain their perception bubble a while longer, but it cannot put money into the hands of retirees, roofers, car mechanics, landscapers and plumbers to spend at the stores!!!

I wrote last year that we have flooded our domestic market with cheap labor and driven down living standards for tens of millions of Americans. I believe this has been deliberate, but regardless, you cannot place American workers who have to support their families in the US domestic economy in the position of wage competition directly with imported labor who are supporting their families in Central and South America. And I wrote last year that Bush was essentially fooling himself, because conditions are such that less and less of these workers are going to try to bring their families here. They can't afford to do it!!!

Maybe Crovelli should just take his gold and his rifle and cross the Mexican border along with, say, another 40 million short-changed American workers. I'm sure enough of a reverse flow of armed Americans could install an old-fashioned American style democracy. This is a ridiculous situation.

Howard of Oraculations has warned of the same thing. Anyone who is in touch with the experiences of a broad cross-section of the American public sees reality. I have not seen any indication whatsoever that Congress Critters (and I do not use the term fondly) or any of the presidential nomination candidates do see reality. You cannot create a situation in which 60 million working Americans are being crushed. Do you know how much a health-care home worker earns in NEW YORK CITY? Read it and weep. Don't come talking to me about Bloomberg for president, he was instrumental in refusing an increase to the largely illegal public health care workers in NYC. He is not on the side of the people.

It is a totally new era in politics, because both parties seem to dominated by elitists. Both. They will get hysterical about global warming, burn corn for fuel raising food costs, and raise gas taxes. Forget the war on terror - both political parties seem to have declared war upon the American people. There is a reason why McCain-Feingold tries to shut down union ads too, you know. God forbid that the workers making $7.00 should get a public voice in, you know, the all-important election time. We wouldn't want that. Must regulate for, ah, fairness to incumbents. The country is being run for the benefit of incumbents in Congress. We need a larger base.

What would JFK say? Think back. What would any of the politicians of old you have admired say? Theyknew in their very bones that the US could not stand as a two-tier economy, and it can't.

In her post, Dr. M broods along about why the politicians are so clearly evading the will of the American people on this immigration bill. The reason is obvious. The bill has been carefully structured so that very few of the workers will actually get naturalized but that workers can flood in at an essentially unlimited pace. This means that the bill will, within another decade, produce a large class of working people who cannot vote. It's a corporate elitist's dream, although they will not be happy to discover just how high the crime rate gets when they have achieved their nirvana of a non-voting peasantry.

Yes, this is a rant. But it's a righteous rant. I am not against immigration, but I am for a genuine democracy. We cannot allow current political, economic and social trends to continue. There can be no comfortable middle class without a comfortable lower middle class and a working class with a future. The Chief is very disturbed; he thinks the move is on to turn this country into a country similar to the one from which he came.

Anyone who thinks socialism can solve our problems is nitwitted. Socialism cannot function with a high immigration rate. Socialism creates elitist states, and the United States is so constituted and situated that it can never become an elitist state. It would have to move first to totalitarianism.

New Orders For Durable Goods

New orders for manufactured durable goods in May decreased $6.1 billion or 2.8 percent to $213.0 billion, the U.S. Census Bureau announced today. This followed three consecutive monthly increases including a 1.1 percent April increase. Excluding transportation, new orders decreased 1.0 percent. Excluding defense, new orders decreased 3.2 percent....Nondefense new orders for capital goods in May decreased $6.5 billion or 8.3 percent to $71.8 billion.

This is an advance report; maybe it will get a little better on revision. Nondefense capital goods is considered an important number. In an attempt to assuage my anxiety, I resorted to the detailed numbers. If you go to the left on the link and click on the "highlights" for advance reports, you can download a more detailed version.

According to it, as of this release, YTD durable goods shipments decreased 0.2% compared to last year, while YTD new orders for durable goods increased 0.5%. That's on page 2, right at the top (of the pdf release).

The aircraft industry is still providing all the life in this economy; YTD new orders for nondefense aircraft and parts are up a staggering 28.3% compared to 2006 same period.

YTD new orders for nondefense capital goods are up 3.3%, whereas shipments declined .5%. But that number includes aircraft! Ex-aircraft, YTD new orders and shipments for nondefense capital goods declined 1.4% for both categories. So it really is aircraft that are providing the lift; aircraft orders fell sharply from April to May, which really seems to have produced most of the drop in new orders. From March to April, SA non-defense aircraft new orders declined 11%, and from April to May they declined 22.7%.

I always look at new orders for primary and fabricated metals, because those are used in heavy manufacturing and they often seem like leading indicator. Both declined from April to May, whereas they were positive from March to April.

Computers and related products new orders were up, but if you look at unfilled orders (page three of the pdf) they are down 11.6% YTD and the month-to-month decrease has been accelerating, going 6.4% > -4.9% > -13.5%. Inventory also increased, so not a lot of life there. Unfilled orders for capital goods are still rising, but this is the month-to-month trajectory: 2.6% > 2.3% > 1.2%. Inventories for capital goods rose again, but at the same rate (0.7%) as they did March/April.

Not a lot of strength here. Unfilled orders keep looking sharply positive by historical standards, but they never seem to translate to the type of activity that I would expect. I am beginning to believe this is because a lot of the domestic manufacturing still being done is produced by importing major parts and final assembly happening in the US. So new orders do not translate into the same type of broad manufacturing stimulus than they used to.

Tuesday, June 26, 2007

A Look At Sea-Level And Blueberries

First, global sea-levels: (hat tip Kobayashi Maru & Mover Mike). Here's a European scientist who's furious about what he claims is severe misrepresentation of the evidence in the IPCCreport. I'm just going to excerpt enough to convince you to read it:

I am a sea-level specialist. There are many good sea-level people in the world, but let's put it this way: There's no one who's beaten me. I took my thesis in 1969, devoted to a large extent to the sea-level problem. From then on, I have launched most of the new theories, in the '70s, '80s, and '90s....we can see that the sea level was indeed rising, from, let us say, 1850 to 1930-40. And that rise had a rate in the order of 1 millimeter per year. Not more. 1.1 is the exact figure. And we can check that, because Holland is a subsiding area; it has been subsiding for many millions of years; and Sweden, after the last Ice Age, was uplifted. So if you balance those, there is only one solution, and it will be this figure.

That ended in 1940, and there had been no rise until 1970; and then we can come into the debate here on what is going on, and we have to go to satellite altimetry, and I will return to that. But before doing that: There's another way of checking it, because if the radius of the Earth increases, because sea level is rising, then immediately the Earth's rate of rotation would slow down. That is a physical law, right? You have it in figure-skating: when they rotate very fast, the arms are close to the body; and then when they increase the radius, by putting out their arms, they stop by themsel-ves. So you can look at the rotation and the same comes up: Yes, it might be 1.1 mm per year, but absolutely not more. It could be less, because there could be other factors affecting the Earth, but it certainly could not be more. Absolutely not! Again, it's a matter of physics.

So, we have this 1 mm per year up to 1930, by observation, and we have it by rotation recording. So we go with those two. They go up and down, but there's no trend in it; it was up until 1930, and then down again. There's no trend, absolutely no trend.......those people in the IPCC [Intergovernmental Panel on Climate Change], choose Hong Kong, which has six tide gauges, and they choose the record of one, which gives 2.3 mm per year rise of sea level. Every geologist knows that that is a subsiding area. It's the compaction of sediment; it is the only record which you shouldn't use. And if that figure is correct, then Holland would not be subsiding, it would be uplifting.

And that is just ridiculous. Not even ignorance could be responsible for a thing like that....Then, in 2003, the same data set, which in their [IPCC's] publications, in their website, was a strai-ght line—suddenly it changed, and showed a very strong line of uplift, 2.3 mm per year, the same as from the tide gauge. And that didn't look so nice. It looked as though they had recorded something; but they hadn't recorded anything. It was the original one which they had suddenly twisted up, because they entered a “correction factor,” which they took from the tide gauge. So it was not a measured thing, but a figure introduced from outside. I accused them of this at the Academy of Sciences in Moscow —I said you have introduced factors from outside; it's not a measurement. It looks like it is measured from the satellite, but you don't say what really happened. And they ans-wered, that we had to do it, because otherwise we would not have gotten any trend!

That is terrible! As a matter of fact, it is a falsification of the data set. Why? Because they know the answer. And there you come to the point: They “know” the answer; the rest of us, we are searching for the answer. Because we are field geologists; they are computer scientists. So all this talk that sea level is rising, this stems from the computer modeling, not from observations. The observations don't find it!

The climate numbers really are being fudged right and left. Climate Audit often looks in great detail at such malfeasance. Another interesting site is SurfaceStation.org, at which volunteers survey surface stations that collect weather data to detect any problems problems that would affect the data, and then the volunteers upload their findings, complete with photgraphs.

I think the peasants are revolting, and it is certain that climate "scientists" find such peasants absolutely disgusting. To understand why, look at this post at Climate Audit using the information uploaded to Surface Station for the Ukiah station, and CHECK OUT THE GHCN RAW DATA vs all the "adjusted" versions:Me, I just track when the blueberries ripen, and according to my Rethuglican Big-Oil Influenced blueberries, it's getting significantly cooler and has been for years. I have tried talking to them about the Fairness Doctrine, but they stubbornly insist on their Right-Wing Delayed Ripening Theocratic World Domination campaign. I'm waiting for Senator Feinstein to come by and give them what-for; clearly they need to be "encouraged" to adopt a balanced viewpoint on the issue so that facts can be heard. Of course, Roger Pielke also must be suppressed. We will only have a safe, sound society when the blueberries and scientists have been included in the global warming Gleichschaltung.

Based on my personal experience with the intransigent nature of right-wing blueberry bushes and scientists offended by the misuse of data (if I had thought to videotape Chief No-Nag's yodeling on the topic, I'd be rich by now), I would suggest that Senator Feinstein use a flame-thrower; a speech code just won't do it.

A Non-US Look At Things

Sometimes the foreign economic analysis is a lot more objective. This Telegraph article throws hard punches and calls for a hard landing:

The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research...."Excess liquidity in the global system will be slashed," it said. "Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing."

Then the Bear Sterns hedge fund comes up:

"The banks were not prepared to bid over 85pc of face value for CDOs rated "A" or better," he said.

"God knows how low the price would have dropped if they had kept on going. We hear buyers were lobbing bids at just 30pc.

"We don't know what the value of this debt is because the investment banks shut down the market in a cover-up so that nobody would know. There is $750bn of dubious paper out there in the form of CDOs held by banks that have a total capitalisation of $850bn."

Well, jeeze, by the standards of today's hot LBO deals, 10% left over is darned good! Whaddaya mean calling that a problem? It does mean that there will be less money left over to lend, though.... Hmm, maybe there is a problem.

Monday, June 25, 2007

FEDERAL ELECTION COMMISSION v. WISCONSIN

The powerful have never enjoyed criticism; in reality, few of us do enjoy criticism. Generally our tolerance for criticism is inversely related to the accuracy of the criticism. When those we elect to serve us begin to confuse their own desire to escape criticism with what is best for their constituents, the erosion of our rights escalates. McCain-Feingold was a well intentioned and poorly conceived abomination that has failed in almost every conceivable way (and the Supreme Court today has begun redress); the Fairness Doctrine was a poorly intentioned and well conceived abomination which should remain interred.

It appears that the next election will be all about various "issues" that will serve primarily to obfuscate serious threats to our fundamental rights...interesting times impend.

I'm looking forward to reading this one thoroughly, because Scalia dissented as to the test (joined by Thomas and Kennedy) and the Fab Four of "Active Congressional Liberty and Lifetime Senatorial Office Tenures" apparently dissented en bloc, etc. The final result was that Wisconsin RTL should have been allowed to run its ad asking that voters contact their representatives to ask them to allow the federal judicial candidates to receive a floor vote, even if the ads were running close to an election.

To whet your whistle, here's Scalia (starts on page 37):

A Moroccan cartoonist once defended his criticism of the Moroccan monarch (lèse majesté being a serious crime in Morocco) as follows: “‘I’m not a revolutionary, I’m just defending freedom of speech. . . . I never said we had to change the king—no, no, no, no! But I said that some things the king is doing, I do not like. Is that a crime?’”1 Well, in the United States (making due allowance for the fact that we have elected representatives instead of a king)it is a crime, at least if the speaker is a union or acorporation (including not-for-profit public-interest corporations) and if the representative is identified by name within a certain period before a primary or congressional election in which he is running....There is wondrous irony to be found in both the genesis and the consequences of BCRA. In the fact that the institutions it was designed to muzzle—unions and nearly all manner of corporations—for all the “corrosive and distorting effects” of their “immense aggregations of wealth,” were utterly impotent to prevent the passage of this legislation that forbids them to criticize candidates (including incumbents). In the fact that the effect of BCRA has been to concentrate more political power in the hands of the country’s wealthiest individuals and their so-called 527organizations, unregulated by §203. (In the 2004 electioncycle, a mere 24 individuals contributed an astoundingtotal of $142 million to 527s. S. Weissman & R. Hassan, BCRA and the 527 Groups, in The Election After Reform 79, 92—96 (M. Malbin ed. 2006).) And in the fact that while these wealthy individuals dominate political discourse, it is this small, grass-roots organization of Wisconsin Right to Life that is muzzled.I would overrule that part of the Court’s decision in McConnell upholding §203(a) of BCRA. Accordingly, I join Parts I and II of today’s principal opinion and otherwise concur only in the judgment.

It really is incumbent-protection legislation, and that is why it has such bipartisan support. To form a corporation is cheap, and unions are already around. Lord forbid that these nattering little people mess up the wonderfully planned media campaigns of Congress; such doings are, apparently to a majority of Congress, a demoralizing corruption of their benign reign which defeats the public's interests because of course the public would not wish their precious time to be taken up with explaining to such niggling gnats of democratic hubris why they voted as they did.

This is great stuff. Honestly, once you start reading Supreme Court decisions you won't be buying best sellers any more. These things are more gripping, especially the back and forth. Scalia, Kennedy and Thomas are right. Most of BCRA is profoundly unconstitutional; from now on in this blog it will be designated the "Bad Congressman Rescue Act".

This is the First Amendment:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Assembly in a corporation or a union does not cause people to lose their First Amendment rights. Indeed, to compete with the very large corporate funnelings of money to candidates, citizens may well be driven to pool their resources to air their concerns.

And The R Word Is Spoken

Household Formation. What’s that? It’s first time homebuyers. Whether it’s young professionals, new families, or new investors, none of these people, well, a lot less than usual, are jumping into the market. Household formation is down 70% (!) in the first quarter of this year from last year. On an annualized basis, it’s less than 500,000, which Yun calls, “rare.” You only see that in a real economic recession.

Note that this does not mean in a "housing recession", but rather in an overall recession. There is no question that this and other statistics show a consumer recession driven by escalating consumer debt and inflation-reduced incomes. The GDP and industrial production numbers don't look so hot either. The CNBC report critiqued NAR's description of the situation:

“The market is underperforming when you consider positive fundamentals, such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” says Yun. “It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market.”

This is nonsense. The problem is with first-time homebuyers, and relatively few of them are reading blogs such as Calculated Risk. Furthermore, any place in the country in which employment is good (along with wages) and housing affordability ratios are anywhere within shouting distance of historic norms, home sales continue to be strong. It's all about what the consumer has left to spend and the expiration of pie-in-the-sky mortgages, which are now defaulting in awesome percentages and therefore forcing a correction in lending standards.

The economic fundamentals for consumes are not positive, which is why we see extremely poor retail sales and a continuing decline in home sales.

Existing Home Sales for May

Interesting reports. It makes more sense to consider single-family and condos separately, so I will concentrate on that.

Overall sales dropped from a month ago and a year ago. The eternal optimists of NAR seem to believe that the relatively small drop from a month ago means that the market is stabilizing. They've been singing this tune for over nine months, and it's no more accurate than before. April numbers were so extremely bad that the May drop seems less in comparison, but YoY continues a steady downward trend. Months of inventory are rising as well. The national figures mean little, but the figures by type and region tell a tale.

If you notice, most of the sales price decline showed in the south and midwest. These are currently the largest single family markets, so they overwhelmed the rest of the report. Both the south and west are showing large declines.

For condos the price declines were concentrated in the south and the west. The condo market for the northeast does look good. The big drop in condo sales for the midwest along with the rise in pricing looks like condos are an urban phenomenon in the midwest. As single family becomes more affordable midwesterners are largely skipping the condos and buying houses.

Everything we are getting shows that the market is returning to more traditional parameters such as median price/median income. If those parameters are going to rule housing, than we have a few years of price declines coming.

What's astounding about May is that the median prices dropped. Because most of the changes in the mortgage market have impacted bottom-end buyers, under any normal situation one would now expect median prices to be rising. We are seeing the decline in median prices in the south and the west for condos and in the midwest and the south for single family. Single-family housing is far more affordable in the midwest and the south, so the bottom third of housing is probably still moving. The reason we don't see a significant downward price adjustment in the west for single-family housing is because the market for the bottom end probably dropped out, which is causing that very large YoY decline in sales. Home values are falling rapidly there, but the mix is changing so much that it doesn't show.

There are more market negatives in the pipeline; i.e. the FNMA subprime hike and the recent rise in average mortgage rates. So nobody knows where this will end, but at this point the housing market is not poised for improvement.

If you want to get a feel for what pricing is really doing, try The Housing Tracker (linking to new with more markets). Over the last year, for example, the median list price has dropped 7.2% in Orange County and 6.9% in Los Angeles. The apparent stickiness of western single-family prices is an illusion. In some areas, prices have dropped 10-20% over the year. But there is no one left to buy homes except those with a lot of money: the price/income ratio for LA is over 10. For Orange County it is over 8.

There is a function in the housing link I gave above that will show you these ratios (click on the city, and then the affordability link at the bottom of the paragraph at top). They seem to be pretty close with mine, and you can see how they have changed with time. These ratios are close to double what they were 5 years ago in many places. Housing really will not pick up until inventory clears, and inventory won't clear until affordability improves. In areas of the country in which there are good jobs and non-inflated home prices, real estate is doing very well!!! But, then, it was last year too.

This has nothing to do with the media or some nationwide doldrums. It has to do with economic fundamentals which can not be escaped.

Thursday, June 21, 2007

What With The Episcopalian Muslim Women Priests...

...some of the Anglicans are thinking that the Seminary Forminator (YouTube) is the next logical step if TEC wishes to survive.As it so happens, the Rev Redding who is now a Muslim Episcopalian minister (with her bishop's blessing) was actually the director of faith formation at the diocese cathedral!

Youcan read about her here. What really fascinates me is that the liberals in TEC (the former ECUSA, for which there is now no excuse) seem to be very much in favor of this really type of radical "interfaith" outreach. Wiccan/Druid/Muslim/Episcopalian priests win a benign smile of approval, as do love spells and really obscene alternate liturgies having to do with stuff I will not name. Anything goes, as long as no Episcopalian insists on quoting Jesus' "I am the Way, the Truth and the Life". TEC just doesn't want any of those living-but-exclusive waters, thank you. It seems to have decided that paganism is the way to go, because those in charge of the church are simply not Christian by any historically accepted standards and they don't seem to be reliably monotheistic either.

I cannot figure out how they square their ardent support for abortion rights and gay marriage rights with Islam, though. You would think Islam would be as on the outs with TEC as Christianity, frankly.

Maybe the attraction is the "once you convert, you may not recant on pain of death" Islamic thing, because TEC has taken the same position. Not only can I not get them to admit that I'm out, they are refusing to admit that my mother, who is now dead but left while she was still quite living, is no longer a member. I suppose the new TEC anthem is a slightly bastardized version of Hotel California. So I take Schori's claims on Episcopalian membership with some skepticism. For the nonce, I'm Reformed Episcopal, but TEC will never, ever admit that.

Oh, yes, the Catholics are finding this a little hard to swallow, but then it's always nice to see the Catholics having fun. For some reason they seem almost infinitely more lighthearted than Episcopalians lately. Don't miss the wacky world of Stephen at The Word.

And I leave you with the TEC Anthem:

On a dark desert highway, cool wind in my hairWarm smell of colitas, rising up through the airUp ahead in the distance, I saw a shimmering lightMy head grew heavy and my sight grew dimI had to stop for the nightSchori stood in the doorway;I heard the mission bellAnd I was thinking to myself,this could be heaven or this could be hellThen she lit up a candle and she showed me the wayThere were voices down the corridor,I thought I heard them say...

Welcome to the hotel episcopaliaSuch a lovely placeSuch a lovely facePlenty of room at the hotel episcopaliaAny time of year, you can find it here

Her mind is feminist-twisted, she got the shepherds' crookShe got a lot of pretty, pretty boys, that she calls friendsHow they dance in the courtyard, sweet summer sweat.Some dance to remember, some dance to forget

So I called up the captain,please bring me my wineHe said, we havent had that Spirit here since nineteen sixty nineAnd still those voices are calling from far away,Wake you up in the middle of the nightJust to hear them say...

Welcome to the hotel episcopaliaSuch a lovely placeSuch a lovely faceThey livin it up at the hotel episcopaliaWhat a nice surprise, bring your alibis

Mirrors on the ceiling,To talk of sin's not niceAnd she said we are all just prisoners here, of our own deviceAnd in the masters chambers,They gathered for the purgeThey stab it with their steely glares,But they just cant kill the Word

Last thing I remember, I wasRunning for the doorI had to find the passage backTo the place I was beforerelax, said the night man,We are programmed to receive.You can checkout any time you like,But you can never leave!

Omp, Omp, Omp, And Another One Bites The DUST!

Update: Brookstreet also? See Calculated Risk. The problem is a hefty drop in collateralized mortgage obligations bought on margin. A small firm, but the problem is that a larger player revalued Brookstreet's holdings. Basically, it's a margin call and I guess they weren't able to ante up. Our stern and sad bear is cancelling the Everquest IPO. One thing's for sure, this is going to put further downward pressure on housing. Merrill Lynch apparently sold just a fraction of its BS hedge collateral, but Lehman seems to be going to move some too. Sitting at the table is getting quite expensive. End update.

The filings come almost two months after Lisle, Illinois- based Ritchie sued Coventry First LLC for allegedly misleading it about life insurance co-investments. Coventry seeks to dismiss the lawsuit, calling it a ``cheap publicity stunt'' to divert attention from Ritchie's own financial problems.

Heh, heh, heh, who woulda thunk one could lose money on this?

The two debtors were formed in 2005 to invest in the so- called life-settlement market where wealthy individuals over age 65 sell their life insurance policies for less than the death benefit and more than the cash-surrender value.

The buyer continues to pay the premiums, betting that the named-beneficiary of the policy will die soon enough to make a profit.

Words fail me. See the post below. The economy's quite weak and the financial unwind is slowly gaining strength. T-Bills have never looked so good to me.

Diffusion, Baby

It's the highest level of claims since April. The four-week moving average of new claims rose by 2,500 to 314,500, a six-week high. The number of people continuing to collect unemployment benefits rose by 39,000 to 2.523 million in the week ending June 9.

Year over year comparisons suffer because last year was a very good year for employment. Nonetheless, the employment trend has shifted, with initial SA claims going 309,000 >311,000 > 311,000 > 314,000 > 324,000. Continuing NSA claims, which lag initial by a week, have gone 2,231,139 > 2,254,344 > 2,267,739 > 2,303,069. Continuing claims are a better employment measure than initial claims, because you can get quite high initial claims in a transitional economy, but if employment is strong the unemployed find new jobs quickly. This was the weekly Doleta report state highlights:

State Change State Supplied CommentMI -1,093 Fewer layoffs in the automobile industry.STATES WITH AN INCREASE OF MORE THAN 1,000 State Change State Supplied CommentNY +1,124 Layoffs in the construction and service industries.NJ +1,481 Layoffs in the trade, service, and manufacturing industries.GA +1,755 Layoffs in the manufacturing industry.SC +2,420 Layoffs in the manufacturing industry.IL +3,162 Layoffs in the trade, service, and manufacturing industries.FL +3,576 Layoffs in the construction, trade, service, and manufacturing industries, and agriculture.PA +5,220 Layoffs in the printing/publishing, transportation, chemical, and mining industries.CA +10,333 Layoffs in the trade and service industries.

The higher numbers in the last two monthly employment reports for older workers, younger workers and involuntary part-time workers forecast this change.

We are not seeing any major new holes developing in the economy. It looks more like a spreading and diffusing weakness. The combination of high inflation for basic needs and constrained profits was destined to lead to higher unemployment in the retail and wider service economy. Restaurant sales for casual dining have been slow this year, as have weekly chain store sales. Most regrettably, the weather excuse is running out:

Chain store sales for the week ended June 16 rose 1.9% from the year-ago period, according to a survey released Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales slipped 0.1%. "The roller-coaster pattern of spending continued for the ninth consecutive week," said Michael Niemira, chief economist for the ICSC. "Although warmer weather and Father's Day were present, consumers seemingly were little motivated to spend."

I guess what consumers need is a drill sergeant to "motivate" them? The battier the analyst comments get, the more sure it is that the underlying situation displeases them. Clothing prices have dropped significantly due to weaker sales in most chains. But many other items are higher. The implicit price defllator is higher than the year over year increase, which is never a good sign.

National chain store sales fell 0.8% in the first two weeks of June versus the previous month, according to Redbook Research's latest indicator of national retail sales released Tuesday....The Johnson Redbook Index also showed seasonally adjusted sales in the two-week period rose 1.9% compared with June 2006, also in line with the target.

Redbook said on an unadjusted basis, sales in the week ended June 16 were up 2% from the same week in 2006, after a 1.7% increase the previous week....Sales of hard and soft seasonal merchandise also improved, said Redbook, with summer apparel "active" in both discount and department stories. Merchants dealing in consumer durables such as fans, air conditioners and sporting equipment also had good results, Redbook said.

We're seeing an environment in which consumers are far more careful with spending, and it is likely to persist until gas prices drop significantly. Inflation for food and fuel is understated in the CPI-U, because when these costs rise significantly, consumers must spend more of their disposable income on these items proportionally. But the CPI-U allocation does not change, i.e., it assumes that consumers are still spending the same percent of their income on these items and the same percent of their income on items like clothing or dining out. This, of course, is not true in an environment with increases as high as we have seen lately.

A sale would give banks, brokerages and investors the one thing they want to avoid: a real price on the bonds in the fund that could serve as a benchmark. The securities are known as collateralized debt obligations, which exceed $1 trillion and comprise the fastest-growing part of the bond market.

Because there is little trading in the securities, prices may not reflect the highest rate of mortgage delinquencies in 13 years. An auction that confirms concerns that CDOs are overvalued may spark a chain reaction of writedowns that causes billions of dollars in losses for everyone from hedge funds to pension funds to foreign banks....The perceived risk of owning corporate bonds jumped to the highest in nine months today. Contracts based on $10 million of debt in the CDX North America Crossover Index rose as much as $10,000 in early trading today to $178,500, according to Deutsche Bank AG. They retraced to $171,500 at 8:28 a.m. in New York.

That's just in case you thought I was alarmist on credit. The truth really is that there is a lot of bad paper out there. It will not be repaid on its terms. Major losses will cut into the assumed value of these paper holdings. Mortgages are bad; commercial credit is worse. There are more problems overall there.

A little-noticed change occurred a few days ago which has even broader implications; the Federal Reserve dumped Fitch's ratings when calculating its figures for credit quality and spreads. Instead they will now use only Moody's and S&P. Take heed.

The truth is that commercial credit quality is so bad that no one wants to keep some of this paper; the segments that are growing are the stuff that's handed off to Greater Fools in securitizations - see Outstandings:The paper wealth in this economy is slowly getting eroded. Unfortunately, the response has been to package this stuff up in more and more complex vehicles, which allows everyone to pretend that they are holding paper that is worth considerably more than it really is. If you imagine what the impact on the economy would be if stocks dropped 20% in six months, you can get a handle on the scope of what is being discussed here. You cannot hide this stuff forever, and the cost of hiding it is mounting, scaring the street.

CDO's and other packaged debt obligations (some are CDO's of CDO's) are widely held in various types of funds. If you do not know what your retirement funds are invested in, now would be a good time to find out. All the hedgies and the fund managers have been relying on the fact that they will be the first to know and will get out quickly. That means that the losses are going to run down hill, and guess who's at the bottom of the hill? The consumer's 401K or pension fund, that's who.